Archive for February 16th, 2014

Quote notes (#61)

Garett Jones on the Chamley-Judd Redistribution Impossibility Theorem:

Why isn’t Chamley-Judd more central to economic discussion? Why isn’t it part of the canon that all economists breathe in? Why isn’t it in our freshman textbooks? Part of the reason is surely mood affiliation — it’s an uncomfortable result for some to talk about as evidenced by the handwringing I see in most textbook treatments (exception here, big PDF, p.451). The result can’t be waved away as driven by absurd assumptions: It’s not too fragile, it’s too solid. It’s OK to teach Real Business Cycles since we all know (or “know”) that the Federal Reserve and aggregate demand really drive things in the short run. But to tell people that if we care about the long run, the tax on capital income — on interest, profits, dividends — should be zero? And to have only “exotic” counterarguments? Let’s just leave that for the more advanced courses …

(Thanks to Jim for the pointer. “The Chamley-Judd Redistribution Impossibility theorem is economists admitting Ayn Rand was right while trying to sound as if they are not admitting it.”)

February 16, 2014admin 20 Comments »
FILED UNDER :Political economy